Following Central Bank’s restriction of locals and non-banking corporates from participating in the high-yielding OMO auctions, Foreign investors seems to have shifted their focus from the volatile equities market to a juicer OMO bills.
Monthly report released by the nation’s bourse shows that total foreign inflow for the month of December plummeted by from N33.59bn in November to N21.69bn in December, the lowest in the year.
During its last MPC meeting the apex bank pulled a rabbit out of the hat with a strong hawkish tilt, by raising the CRR by 500bps to 27.5percent from 22.5percent to curtail liquidity build up in the market and hopefully reduce liquidity induced inflationary pressure. The sale of OMO to FPIs is maintained at a relatively competitive rate as a strategy to preserve the external reserves and keep exchange rates stable.
The Cash Reserve Ratio CRR is the share of a bank’s total deposit that is mandated by the CBN to be maintained with the latter in the form of liquid cash.
According to the NSE report, as at 31 December 2019, total transactions at the nation’s bourse decreased by 25.84percent from N172.52 billion in November 20195 to N127.94 billion in December 2019.
The performance of the current month when compared to the performance in the same period (December 2018) of the prior year revealed that total transactions increased by 1.65percent. In December 2019, the total value of transactions executed by Domestic investors outperformed transactions executed by foreign investors marginally by 2percent.
The total domestic transactions decreased by 24.44percent from N85.76 billion in November to N64.80 billion in December 2019. Similarly, total foreign transactions decreased by 27.22percent from N86.76 billion to N63.14 billion between November and December 2019.
Total foreign transactions decreased by 27.22percent from N86.76 billion to N63.14 billion between November and December 2019.
The value of domestic transactions executed by institutional investors outperformed retail investors by 24percent.
A comparison of domestic transactions in the current and prior month (November 2019) revealed that retail transactions decreased by 24.03percent from N32.21 billion in November 2019 to N24.47 billion in December 2019.
Similarly, the institutional composition of the domestic market decreased by 24.71percent from N53.55 billion in November 2019 to N40.32 billion in December 2019.
In the last thirteen years, domestic transactions decreased by 72.30percent from N3.556t in 2007 to N985bn in 2019 while foreign transactions increased by 53.08percent from N616bn to N943bn over the same period.
Total domestic transactions accounted for about 51percent of the total transactions carried out in 2019, while foreign transactions accounted for about 49percent of the total transactions in the same period.
However, the equities market has regained its mojo since the beginning of trading this year buoyed by the current abysmal rates on sovereign bonds and government short-term debt instruments often called treasury bills, investors are left with no other option than to seek alternative assets classes to invest their funds, and it appears the equities market is now the logical destination of any discerning investor.
As at the close of trading last week, the NSE All share index had gained 10.38percent. Other indices have also returned positive year-to-date with the exemption of the consumer goods index and oil/gas index which was down by 5.87 percent and 3.08percent respectively.
